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Where’s the peak in home prices?

For potential buyers in the current residential home market this is the $64000 question at present. Here’s some information to allow you to make a decision whether to jump in now or hold off and watch the property market. I’ve extracted the following quote from Tim Lawless of ‘Corelogic’ made on the 1st December in regard to market trends:-

"Australian housing values were 1.3% higher in November marking the 14th consecutive month where CoreLogic’s national home value index recorded positive value growth. The November update takes national housing values 22.2% higher over the past 12 months, adding approximately $126,700 to the median value of an Australian home. Although values are continuing to rise, the November result was the softest outcome since January when values rose 0.9%. Since a cyclical peak in the rate of growth in March, when housing values rose at 2.8%, there has been a notable trend towards milder price growth."

Tim goes on to provide several important factors surrounding that slowing growth he says “Virtually every factor that has driven housing values higher has lost some potency over recent months’’

  • Fixed mortgage rates are rising,

  • Higher listings are taking some urgency away from buyers,

  • Affordability has become a more substantial barrier to entry, and

  • Credit is less available.

I would add that a key measure to watch for in respect to the peak in property prices, is the ‘auction clearance rates’. As less homes sell or are passed in because they don’t reach their reserve price it’s a direct indication that supply and demand conditions are adjusting.

Looking at credit accessibility , as I had mentioned in past issues of our breaking news , lenders and Government regulators are looking very critically at debt to income ratios because of increased borrowing levels off the back of these increased property prices. Looking forward as inflation picks up through 2022, continued pressure for interest rate rises will be maintained.

In light of the above , and trying not dissuade borrowers, because each person’s financial and personal circumstances are unique, to adopt a ‘wait and see’ approach at present may be the wise path . Lets get through Xmas and New Year and continue to monitor the market through the early part of 2022.

Merry Christmas from the COMPASS Lending team.

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